Important Facts About SBA Loans
Loans backed by the U.S. Small Business Administration (SBA) have helped countless businesses get off the ground. This article answers some key questions to help you learn more about SBA loans.
What Is an SBA Loan?
Despite their name, SBA loans do not involve the SBA directly lending money to businesses. Instead, the SBA works with lenders to make it easier for businesses to secure funding. The SBA offers to pay back a portion of the loan if it defaults, thus lessening the risk lenders have to take on. In turn, businesses are more easily able to obtain loans.
What Are SBA Loans Used For?
SBA loans serve a wide variety of purposes. For example, according to the SBA, the 7(a) loan program can be used for startup costs, the purchase of land and/or equipment, repairs, debt refinancing, and more. Other types of loans are available for working capital, real-estate purchases, and disaster recovery. For smaller transactions, microloans (under $50,000) are an option.
Does My Business Qualify?
According to the SBA, “lenders and loan programs have unique eligibility requirements. In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates.” The size of the business and its ability to repay the loan also come into account. Lenders themselves set eligibility requirements for each loan.
How Do I Apply?
Before you apply for an SBA loan, the SBA recommends having your business plan ready, knowing how much capital you will need and how it will help your business, being aware of your credit history, and having your financial projections, collateral options, and industry experience at hand. Once you have that information ready, the SBA offers a lender match tool to get the process of finding a lender started.
To learn more about business funding, contact Commercial Capital Lending today.